ASEAN’s Broadband Infrastructure Imperative

Even ASEAN’s most successful economies will not achieve their potential without well-connected neighbors.

By Kris Hartley for The Diplomat

November 17, 2016

Information and communications technology (ICT) now appears to be as crucial for economic growth as transportation and energy infrastructure. Footloose entrepreneurs and Internet-savvy consumers are using small-scale mobile applications to create virtual markets and circumvent regulations. At the same time, developing countries are using ICT to leap-frog traditional growth stages in boosting market connectivity and industrial productivity. ICT proliferation has even been interpreted as a binding force, with international connections among cities and industrial regions having a pacifying effect on geopolitics. Developing countries in ASEAN have already targeted the productivity boost of urbanization and globalization, and ICT is the next frontier. However, there are significant disparities in broadband reliability and penetration across ASEAN. Efforts to create a structurally cohesive and globally competitive bloc, as embodied by the new ASEAN Economic Community, can be enhanced by regional collaboration in ICT and broadband infrastructure development.

ICT in Asia: Mixed Performance

In the Asia-Pacific region 41.9 percent of the population uses the Internet, roughly half the percentage in Europe and 23 percentage points behind the Americas. Further, the region’s fixed broadband penetration is only one third that of Europe, with a majority accounted for by East and Northeast Asia (74 percent). Unsurprisingly, China far outpaces all Asian countries in fixed broadband penetration, expanding from a minimal level in 2002 to over 40 million subscriptions by 2015. Only Japan achieved comparable growth over the same period, but growth has flattened in recent years and subscription rates are still only one sixth of China’s.

In ASEAN countries, mobile connectivity is rapidly increasing but large gaps in Internet penetration persist. Cambodia, Vietnam, and Thailand have ASEAN’s highest number of mobile Internet connections as a percentage of national population, and eight of ASEAN’s ten countries exceed the global average. However, ASEAN still lags East and Northeast Asia in broadband penetration, evident from recent data published by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP). In fixed broadband subscriptions per 1,000 inhabitants, Singapore leads ASEAN at 26.5 but lags South Korea’s 40.2. Thailand and Malaysia hold distant second and third place in the region (9.2 and 9.0, respectively), followed by Vietnam (8.1) and Brunei (8.0). ASEAN’s laggards are Myanmar (0.3), Laos and Cambodia (0.5), Indonesia (1.1), and the Philippines (3.4). The latter occupy the Asia-Pacific region’s bottom half for the same measure. However, there is some sign of progress. Brunei, Malaysia, and Thailand made notable improvements in fixed broadband penetration between 2005 and 2015. Other measures are less promising. Between 2008 and 2014, the Philippines, Thailand, Vietnam, and Cambodia regressed in government online service scores despite improving telecommunications infrastructure. This illustrates the well-worn adage that technology is only as good as its application; investment is wasted without an understanding of how hardware helps achieve meaningful outcomes.

Improved broadband infrastructure would enable ASEAN countries to embrace more leading-edge technologies and related innovations in application. Uptake for the Internet of Things, an emerging application through which objects communicate with one another, is measured often through number of mobile-to-mobile (M2M) subscriptions per standard mobile subscription. By this metric, the greatest gains have been in advanced economies, with Sweden achieving more than twice the uptake as second-place New Zealand. Among Asian countries, only South Korea (#18) ranks among the top-20. This is surprising given South Korea’s highly advanced ICT infrastructure; it is the only country where 100 percent of fixed broadband connections have a speed at or above 10 megabits per second. Asian countries must not fall any further behind on M2M technologies. While Northeast Asia has the technological capacity to catch up quickly, ASEAN will not be globally competitive in leading-edge technologies such as the “Internet of things” without improving broadband connectivity.

Towards a Regional Solution

The independent pursuit of broadband development within countries has resulted in sizable regional differences in connection speeds. To most people who rely on the Internet for at least part of their work, the link between Internet speed and productivity is clear. Internet speeds in South Korea, Japan, and Hong Kong are among the top-10 fastest in the world, but ASEAN and China are lagging. As mobile applications become more sophisticated, the potential for business development and scaling of entrepreneurial activities is growing. Providing basic infrastructure for broadband connectivity – and normalizing speeds across countries – is an urgent regional policy imperative. Incorporating such an infrastructure initiative into the collaborative apparatus that already exists for ASEAN is a viable strategy to close the connectivity gap between ASEAN and high-performing countries in Asia, Europe, and North America.

The ASEAN ICT Masterplan 2020 proposes three initiatives: improve access and connectivity, manage disaster threats, and promote cloud computing. While the plan aims to reduce disparities and improve interoperability, there is no explicit commitment to establish region-wide standards or targets for broadband speed, penetration, and reliability. ASEAN has an opportunity to be the world’s first ICT bloc, boasting tight strategic coordination, common standards for performance, and a funding facility for infrastructure within and across borders. The national-scale institutional elements of ICT (regulation, management, education, etc.) are receiving due attention from domestic policymakers, but elevating regional broadband capacity to global standard – an essential catalyst for industrial transformation – is fundamentally about hard infrastructure.

The way forward is challenging. Development of a regional broadband infrastructure platform would require thorough accounting of the bottlenecks typically attending major public works projects; these include not only financing and geography but also local and national politics. Improving infrastructure through regional initiative also introduces the specter of institutional and administrative complexity. For example, the regional rail corridor proposed for Southeast Asia is dependent on the participation of all contiguous nations – there is little collective benefit if one precocious nation completes its segment while other nations are mired in political and administrative gridlock. The dynamic is similar for ICT, and urgency for efficient collaboration is growing with upcoming investments in additional submarine cable systems. Broadband infrastructure must be developed and managed as a regional resource, lest cross-country performance gaps widen. In the collective spirit of the recently implemented ASEAN Economic Community, institutions and infrastructure underpinning economic growth are “everybody’s business.” Even ASEAN’s most successful economies will not achieve their potential without well-connected and competitive neighbors.

Kris Hartley is a Lecturer at Cornell University and a Nonresident Fellow at the Chicago Council on Global Affairs.